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Dictators don't compete: autocracy, democracy, and tax competition

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  • Philipp Genschel
  • Hanna Lierse
  • Laura Seelkopf

Abstract

It pays to be a tax haven. Ireland has become rich that way. Why do not all countries cut their capital taxes to get wealthy? One reason is structural. As the standard model of tax competition explains, small countries gain from competitive tax cuts while large countries suffer. Yet not all small (large) countries have low (high) capital taxes. Why? The reason, we argue, is political. While the standard model assumes governments to be democratic, more than a third of countries worldwide are non-democratic. We explain theoretically why autocracies are less likely to adjust to competitive constraints and test our argument empirically against data on the corporate tax policy of 99 countries from 1999 to 2011.

Suggested Citation

  • Philipp Genschel & Hanna Lierse & Laura Seelkopf, 2016. "Dictators don't compete: autocracy, democracy, and tax competition," Review of International Political Economy, Taylor & Francis Journals, vol. 23(2), pages 290-315, April.
    • Handle: RePEc:taf:rripxx:v:23:y:2016:i:2:p:290-315
    DOI: 10.1080/09692290.2016.1152995
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    References listed on IDEAS

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    1. Michael P. Devereux & Peter Birch Sørensen, 2006. "The Corporate Income Tax: international trends and options for fundamental reform," European Economy - Economic Papers 2008 - 2015 264, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Michael P. Devereux & Simon Loretz, 2013. "What Do We Know About Corporate Tax Competition?," National Tax Journal, National Tax Association;National Tax Journal, vol. 66(3), pages 745-774, September.
    3. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, January.
    4. Tanzi, Vito & Zee, Howell H., 2000. "Tax Policy for Emerging Markets: Developing Countries," National Tax Journal, National Tax Association;National Tax Journal, vol. 53(2), pages 299-322, June.
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    Cited by:

    1. Cerami, Alfio, 2023. "Self-Undermining Policy Feedback and Social Policy Making in Iraq," MPRA Paper 116381, University Library of Munich, Germany.
    2. Cerami, Alfio, 2018. "The Lights of Iraq: Electricity Usage and the Iraqi War-fare Regime," MPRA Paper 87276, University Library of Munich, Germany.

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